Irvine-Based Tilly's Projects Return to Profitability in Fiscal Year 2026

Tilly's Inc., the Irvine-based retailer, forecasts its first profitable fiscal year since 2022, a goal set earlier this year by Chief Executive Nate Smith. The projection follows four years of declining sales and significant operational changes within the company.

On September 2, Smith indicated the goal is attainable, citing “positive operating momentum” during the first half of fiscal 2026. The company reported a second-quarter sales increase of 8.1% to $164 million, with same-store sales growing 12% for the period ending August 1. Sales for the first half of the fiscal year jumped 11% to $288 million, and comparable store sales were up 16% compared to the same period last year. August has also seen continued growth, with comparable sales rising 15% year over year.

Smith, who joined Tilly's as CEO in August 2025, has focused on overhauling the brand’s merchandise assortment, inventory planning, and pricing strategies. He told analysts on an earnings call, "In reflecting on this past year, we have clearly demonstrated a consistency in execution that we can be proud of."

Beyond initial product and pricing adjustments, Tilly's has invested in artificial intelligence and digital platforms. An AI price optimization tool launched in October 2025 has reportedly improved sales of both full-price and clearance merchandise. The retailer is also preparing to introduce an AI-driven inventory tool to optimize product mix across stores and online. Furthermore, RFID (radio-frequency identification) technology is planned for early 2027, beginning with footwear, to enhance inventory management and size availability.

The company has also sought to rebuild its connection with younger shoppers through an expanded digital presence. Tilly's began selling products on TikTok's online shop in early 2025, prior to Smith's arrival. Later that year, the retailer partnered with content creator and brand ambassador Loren Gray, who has a significant following on TikTok. Smith noted that an improved focus on social media platforms has helped reach new audiences, with TikTok follower count nearly doubling to over 325,000, and its loyalty program membership growing by 20% to 4.6 million members over the past year. E-commerce sales increased by 21% in the second quarter, making up 21% of total net sales, while brick-and-mortar sales grew 5.1% despite operating with 12 fewer stores than the previous year.

The retailer faced challenges in the youth apparel industry, with sales falling 13% to $672 million in fiscal 2023. The company’s stock, which peaked at over $17 in 2022, declined significantly, reaching an all-time low of 57 cents in May 2025 after longtime CEO Ed Thomas's departure in early 2024 and an interim period under co-founder Hezy Shaked. Tilly's reported its first profitable quarter in four years in late 2025, followed by its first year of positive same-store sales growth for fiscal 2025.

Despite these improvements, Smith indicated in March that while not yet profitable on an annualized basis, the company saw a clear path forward after generating profit in two of the last three quarters. Chief Financial Officer Mike Henry added that the turnaround was due to fixed “fundamentals” and growing top-line sales. Smith reiterated in June that returning to profitability was the “foremost goal for fiscal 2026.”

The company's stock experienced a significant rise, increasing as much as 64% to $6.25 per share the day after its fiscal second-quarter report, reaching a new 52-week high. Shares later retreated to $4.25 by press time.

Matt Koranda, Senior Research Analyst at Roth Capital, commented in a September 3 note to investors that the Tilly’s turnaround "has legs" and that "management is delivering across all aspects." Koranda maintained a 'neutral' rating and a price target of $5.50 per share.

Tilly's is now forecasting third-quarter net sales in the range of approximately $150 million to $155 million, which would represent a 7% to 11% increase from the same period last year. Smith emphasized the ongoing effort, stating, "We are encouraged by our progress, but we are not finished. We intend to keep executing and building upon the momentum we have generated."